This has left many companies wondering which steps they need to take to ensure they are complying with existing SEC rules on disclosure of material information driven by climate change-related risks and opportunities.

In order to identify areas of potential material impact, a company will first need to determine whether and how its business strategy and operations are affected by issues related to climate change. This assessment requires consideration of both qualitative and quantitative information since the identification of climate change-related risks and opportunities is driven by both strategic issues and corporate emissions levels.

For example, certain issues as highlighted by the SEC guidance, such as legal, technological, political, and scientific developments, can change the competitive landscape by opening up new business areas or threatening existing ones, thereby triggering the need for disclosure in a company’s management discussion and analysis (MD&A). There are a number of frameworks available to help companies to assess where their climate change related risks and opportunities lie, including the Corporate Ecosystem Services Review developed by the World Resources Institute (WRI), World Business Council for Sustainable Development and the Meridian Institute.

In terms of emissions measurement, companies currently do not need to disclose their carbon footprint in 10K filings, but a greater understanding of its carbon footprint will certainly help a company determine its sensitivity to GHG legislation. During his Jan. 27 speech responding to the guidance proposal, SEC Commissioner Luis Aguilar reaffirmed this point: “Companies should know their emissions information in order to evaluate the risks.”

Not only will quantitative emissions information inform a company of the likelihood of potential costs from regulation, it will also highlight potential benefits, such as profits from the sale of carbon credits, and will help companies to identify opportunities for energy efficiency and cost-savings. We at the Carbon Disclosure Project recommend companies look to the Greenhouse Gas (GHG) Protocol developed by the WRI to foster an understanding of how to begin accounting for GHG emissions. Using the framework will help companies ensure that the measurement of their carbon footprint is accurate, complete, consistent and relevant.

Participation in the Carbon Disclosure Project is one way companies can begin gathering information on their carbon footprint and gain a greater insight on where emissions are concentrated in their operations. In doing so, it can start to determine where climate change issues have material impact and can help companies address the underlying drivers. For companies who wish to reduce their GHG emissions, both the EPA Climate Leaders and WWF’s Climate Savers offer programs to assist with defining and meeting emissions reduction goals.

A number of companies use the information they collect for their CDP questionnaire responses to assist them in creating other outputs, including 10K filings. The CDP questionnaire and related guidance can be used as a framework to begin internally assessing which factors within their business create climate change risks or opportunities.

Sonal Mahida is vice president of the Carbon Disclosure Project (CDP), where she currently oversees operations in the United States.